Amtrak on Schedule For…

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…dismantling?

Maybe. The Bush admin wants to cut aid to the failing national passenger railroad, especially for massively unprofitable interstate lines. But the House of Reps last week voted to give Amtrak $900 million (half of what Amtrak says it needs to stay afloat this year).

Will Amtrak, which has been threatened with "restructuring," bankruptcy, etc. almost since its first train rolled out in the early '70s, ever really get kiboshed? Somehow, I doubt it. Those money-losing rail lines–in 1998, the General Accounting Office did a report showing that Amtrak lost about $47 per passenger, with some lines generating losses of over $200 per–wander through virtually every congressional district in the country. That helps to ensure votes for continued funding.

NEXT: Playing Subsidized Ball

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  1. You’ll hear more of it in the future. A lot of this logic came about during WWII, when supplies of useful materials (like rubber, for example) were cut off by warfare. You can justify almost any subsidy to protect local businesses that way, however. I’m sure the Steel industry made use of this argument (the strategic interest in the US military in having access to steel, which most weapons are made of) to get their little tariff gift from Bush (BTW off topic it’s screwing us in the automotive parts business. Thanks a bunch, Dubya!).

    They’ve got the logic wrong anyway – sure, if you are in a war you might have a hard time getting stuff from people you are at war with. However, economic intertanglement between nations is one of the incentives for peace. The more interdependent we all become, the better we’ll all find a way to get along.

  2. The interstate highway program, more specifically, is a subsidy to the long-distance trucking industry. Virtually all the damage to roadbeds is done by trucks, yet the industry doesn’t pay as much in taxes as the costs it imposes on the system. And any attempt to create self-funding turnpikes, or adopt a weight-distance taxing system, is abandoned because of howls of outrage from the trucking industry.

    But S. M. Koppelman is right: ALL forms of long-distance shipping (especially freight) are heavily subsidized. The railroads were build on land donated by the federal government. The civil aviation system’s airport and traffic control infrastructure was a virtual creation of the federal government. Large passenger jets would never have come about in a free market, because the machine tools are so expensive an entire production run won’t pay for them; but throw heavy bomber contracts into the mix….

    And then there’s eminent (sp?) domain, without which both the interstate’s capacity and the size of airports would be a lot smaller.

    Amtrak, by the way, was a shining example of one of Hilaire Belloc’s predictions in The Servile State. The fabian agenda, he predicted, would entail nationalizing mainly those industries that were losing money, while paying their former owners a much better price than they were worth.

    The effect of all these subsidies is to underwrite the distribution costs of big business, and thus conceal the inefficiencies of large size. Without them, the economy would be a lot less centralized and a lot more efficient.

  3. In merrier news, France is selling about 1/2 of its interest in Renault SA as part of a phase-out plan.

  4. I like trains.

  5. tm, I think they live just down the road from me.

  6. I suspect Amtrak is run by people assigned to kill it. Have you ever tried to schedule a trip on Amtrak? The schedules are set up that you can’t make a connection. The east and west bound trains run on alternate days through here (West Virginia) – but on the same day within hours of each other. Business travel is impossible except on the NE corridor. I’d travel south on Amtrak any chance I got, but the connecting north-south train leaves shortly before the west-east train arrives. A next day layover is not in any of my plans. (You can make a connection if you’re headed north.)

  7. I wouldn’t call public roads a subsidy. Without commenting on whether or not roads should be provided by the government, normally when one hears of subsidies, it’s in reference to a grant to a specific person/industry/corporation/group. Most things which receive the label “subsidy” also introduce gross distortions into the market.

    Roads lack the specificity associated with most other subsidies. Bearing in mind the caveats on driver and vehicle registration, roads are still very general-use infrastructure. Some people benefit greatly from interstate highways. Others benefit mostly from city streets. But everybody benefits from streets in some way, so public roads lack the specificity of other subsidies.

    As for the extent to which public roads distort the market: As long as vehicle fuel is taxed (for good or for ill), and if the taxes are limited to road construction and repair, we’re using a crude user fee. It isn’t elegant, it isn’t perfect, and it isn’t privately administered, but it more or less assigns road costs according to usage and wear-and-tear incurred on roads (larger vehicles get fewer MPG and pay more taxes per mile driven, but they also inflict more wear and tear).

    Obviously there’s the problem that a driver in CA pays federal gas taxes that might be used to repair a highway in Maine, but that driver in Maine might wind up paying gas taxes for a highway in California. It isn’t perfect, it isn’t elegant, and it isn’t privately administered, but it doesn’t introduce the sort of distortions associated with most things that get the label “subsidy.” That’s not to say it’s good, just to say that I wouldn’t put it in the same category as massive market distortions like farm subsidies, airline bailouts, or the new steel tarriffs.

    As for whether a tax credit for SUV purchases is a “subsidy” or “give away,” I’m not normally inclined to call any sort of tax cut/credit a “giveaway.” A tax cut/credit just lets a person keep more of his own money, not receive somebody else’s.

    HOWEVER, our complicated tax code, with all sorts of deductions and credits, most definitely distorts the market. The government encourages or discourages certain behaviors and transactions by basing how much of your money you can keep on how you use it. This packs the double whammy of

    1) Giving your money to politicians
    2) Introducing incentives and costs that would not exist in a free market.

    A flat tax, for all of its flaws (including the moral problem with taxation) would distort the market far less than our current tax code. This is not to say it’s good, just to say that it would be a step in a better direction.

    OK, go ahead, call me a liberal Democrat.

  8. thoreau:

    Any government “service” that is not funded with cost-based fees is a subsidy, and distorts the market. Fuel taxes are not close to being even a “crude” user fee, since wear and tear on the roads is proportional mainly to weight, not fuel use. Since the overwhelming majority of damage to the roads is caused by heavy trucks, but a commensurate portion of highway revenue does not come from taxes on trucks, it follows that trucks are subsidized.

    As for whether “targeted tax breaks” equate to subsidies, they produce the very same situation that would exist if we started out from a zero tax rate, and then imposed taxes only on activities NOT favored by the State.

    As a related issue, I regard the corporate income tax as a powerful cartelizing force, since its existence serves only to underline the difference in privilege between the giant corporations that pay little or no tax, and can pass on what they do pay to the consumer because their industries are so heavily cartelized), and the ones in the competitive sector that pay it and can’t pass it on.

    Eliminating the corporate income tax altogether would create a much more level playing field. Those big corporations currently benefitting from R&D tax credits, interest deductions on debts from acquisitions, accelerated depreciation, etc., would cease to have a competitive advantage from the tax code.

  9. Kevin-

    Damage may be proportional to weight, but isn’t fuel use also proportional to weight?

    Anyway, because roads are universally available to all people (insert caveats about driver and vehicle registration) they do not introduce nearly as much distortion as farm subsidies, airline bailouts, etc. You can use the word “subsidy” to describe the roads if you wish, but the economic effects of public roads are clearly in a different category than the economic effects of farm subsidies.

    Also, public roads are one of the few government expenditures that (however wrongly) facilitate profitable exchanges. Tarriffs inhibit economic activities. Farm subsidies sometimes explicitly discourage food production. Bailouts encourage _unprofitable_ business practices.

    The public roads, however imperfect they may be, are not in the same category as so many other things that the government does. On my list of economic reform priorities, privatizing roads is near the bottom. Deregulation of energy and medicine, large tax cuts and streamlining of the remaining taxes (to fund a handful of essential gov’t functions), tort reform (at the state level, NOT the federal level), and elimination of trade barriers are much higher on my list of priorities.

    One reason we libertarians look so bad to so many people is that too many people put city streets in the same category as steel tarriffs.

  10. $900 million! I also am not a functioning rail system. Can I have some?

  11. Talk about buggy whips manufacturers! What purpose does a national passenger train system serve when you can fly for roughly the same price ( sometimes less) and ten times faster?
    Unless they install a high-speed “bullet” train, there’s no incentive not to fly. Maybe this could be done between NY and LA, with a stop in chicago, or up the atlantic coast.
    When movie theatre attendance went down in the 1950’s due to television, the theatre chains didn’t get $900 Billion in govt. subsidies- what the movie industry did to compete with TV was to provide what TV couldn’t: “glorious technicolor, breathtaking cinemascope, and stereophonic sound!” If Amtrak can’t compete with airplanes in speed or price, they could at least make the train ride an experience reminiscent of a transatlantic steamer: rich, opulent luxury travel with entertainment and fine dining, etc. Instead of that crappy little dining car…

  12. “If Amtrak can’t compete with airplanes in speed or price, they could at least make the train ride an experience reminiscent of a transatlantic steamer: rich, opulent luxury travel with entertainment and fine dining, etc. Instead of that crappy little dining car…”

    And topless waitresses. That would be good.

  13. “And topless waitresses. That would be good.”
    To compete with Hooters Air.

  14. I had no idea America’s roads, on the aggregate, ran at a profit. Is that why nearly all of them are funded with taxes? And if airlines are doing so well overall, why do they receive huge subsidies?

    Amtrak was mismanaged for a long time. Is it still? It’s hard to tell, given the funding and regulatory constraints it’s been put under by the politicians who want to strangle it.

  15. “The funds are not all spent on highways. The government just spends all it gets (and more) on general expenses.”

    Ahem … The government just wastes all it gets (and more) on perks, unauthorized junkets, and all sorts of unnecessary stuff.

  16. Amtrak GS?rs are working on the railroad
    just to pass the time away.

    Can?t you hear the whistle blowing?

    (Someone?s in the kitchen with me.)

  17. I am sooooo going to hell for writing this…

    My twisted little idea of having topless waitresses on Amtrack might not be such a good thing. With Amtrack so enmeshed with the feds, you know that they would have to hire fat chicks in order to be “fair”. Probably just stick to Mr. Stetson’s idea of a luxury dining coach.

  18. I agree s.m. koppelman.

    How much money did the entire US road network lose per driver?

    How much money will it need to be bailed out to prevent potholes on the freeways?

  19. Does the ability to write off around $80,000 of the cost of a Hummer count as a federal subsidy?

  20. I think the highway system, in aggregate, is paid for by fuel taxes, which are reasonably close to a user fee. Of course, that doesn’t mean every single road pays for itself or has a non-porkbarrel reason to exist; many are clearly political projects.

  21. S.M.:

    Most railroad lines are owned by the freight companies and Amtrack buys time on them (especially the long-distance interstate ones). So the analogy is: does Greyhound operate at a loss and get government subsidies, due to the fact that they run on government-sponsored roads, and is that subsidy equal to $900 million per year (or, to be more accurate, $1.8 billion per year, which is what Amtrack says it needs)?

    I’m sure the subsidy is in the millions, but I kinda doubt it is that much, given how many other users the subsidy is spread among.

  22. “I think the highway system, in aggregate, is paid for by fuel taxes, which are reasonably close to a user fee.”

    Not really. The fuel tax is just another tax.

    The funds are not all spent on highways. The government just spends all it gets (and more) on general expenses.

    The highway trust fund has an unspent balance because it’s part of the budget and spending all the money on highways would “increase the deficit”. This is the same as the Social Security “tust fund” and the assets are probably just as invalid (IOUs from one government agency to another).

  23. bomb bomb,
    To some people a fat chick is a luxury dining coach.

  24. Another idea to make passenger rail service profitable would be to piggyback it onto the already profitable freight service: seat customers in the comfy new cars being transported by rail, where they can listen to CD’s, consult Onstar or GPS to track their progress, the kids can play at driving. More adventurous types can do it hobo-style in a box car. Current railroad employees could be transitioned into portraying loveable, harmonica or banjo-playing Emmet-Kelly style hobos. “Jimmy crack corn/and I DON”T CARE…..”

  25. As a lover of European rail, I can expertly say that Amtrak sucks. Admittedly some rail in Europe is subsidized, but at least it is a good product. America has nothing to compare to the TGV.

  26. What disgusts me is when people like Steve Forbes justify the subsidies for National Security reasons.

  27. MP,

    That’s a common argument, and has been used a lot in the wake of 9/11.

  28. Croesus: not all European train lines function well. Here in Germany, the Bahn is famous for sucking: expensive as hell, hugely subsidized, often late.

    I had the same idea as Rex has, to piggyback passenger rail with freight. Turns out that the choice to not carry passengers was made by the freight companies, who thought it too much hassle and not worth the money. So, maybe there is an opportunity here.

    Rail is important because it is not a good idea to rely exclusively on one mode of transportation–bad risk management. This doesn’t mean that the US gov’t should be running the rail system, but there must be a balance possible. And surely we shouldn’t demand that Amtrak run without subsidy until we have the airline and highway industries off the tax-dollar teat.

  29. Frenk,

    German trains are a paradise in comparison to Amtrak, at least that is my impression of them. I think the best rail systems in Europe are those in France and Spain.

  30. I’ve “ridden” on only one train, but never got to see much of either the tracks or the railroad business itself … because I was trying to solve a murder (on the Orient Express.)

  31. Why is it left to the liberal to note that the money pit passenger line through Montana is called “The Empire Builder?”

    I think the feds should spend more than $1.8 billion per year on intercity rail service, but restructuring has to happen.

  32. thoreau:

    Instead of saying that damage was proportional to weight, I should have said it was virtually nonexistent below a certain weight threshold. So for taxes to be allocated according to cost imposed on the system, they would have to be almost entirely on diesel fuel.

    And all subsidies facilitate profitable exchanges, in a sense. All subsidies promote the profits of net beneficiaries, at the expense of those not subsidized. For example tariffs promote profitable exchanges by protected industry, but at the expense of consumers and of efficiency.

    Subsidized long-distance shipping promotes the profits of the most transportation-intensive firms, but at the expense of more efficient producers for local markets. The subsidy of any form of economic activity benefits those most intensively engaged in it, at the expense of those who are not.

    As for the general public benefits, I’d say that subsidized freeway systems simply promote further sprawl, and thus secondarily promote even more dependence on subsidies to urban freeway systems. The need for subsidized freeways between work and suburbs was created by other policies subsidizing sprawl: FHA redlining, zoning restrictions on affordable housing in downtown areas, and restrictions on mixed use development in the suburbs. This is another of those cases where the state’s market distortions create the need, and then the state steps in to fill the need.

  33. If Amtrack goes belly up it wouldn’t bother me any. No experience with them has been good. Ask any Amtrak rep a question and you rarely get the same answer twice. At certain stops you can take larger luggage, but only if you exit from that certain spot, otherwise your limited to 2 small carry-ons. Want to take your bicycle, only on certain routes and only if they open the luggage compartment at your stop. Actually, you can fly cheaper than taking Amtrak. Remember, rail service East of the Mississippi is almost non-existant.

  34. If you break down the amount of money each citizen pays for transportation, the numbers help put things into perspective.

    Simply put, each taxpayer dishes out $120 a year to keep the roads in reasonably good shape. And it costs about $60 to keep the airports up and running.

    Amtrak costs each taxpayer about $6 a year. That seems like money well spent. As a person who gave up flying over over six years ago, I count myself as a very satisfied customer. I have taken the trains from Vancouver to Miami with very few problems.

    For the most part Amtrak is not to be blamed for the delays a passenger may experience. Since Amtrak rents right of way from the freight trains, delays are inevitable. If Congress would legislate that passenger trains have the right of way, perhaps these delays would no longer exist.

    I am fully confident that Amtrak will get the money it requires to operate in 2004. Overall, America has a bi-partisan love affair with passenger trains and every poll seems to reflect that passion.

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